IC 11 - Practice of General Insurance Exam Study Notes

The Erection All Risks (EAR) Policy is also known as Storage-cum-Erection Policy.
Underwriting : insurance underwriters evaluate the risk and exposures of portential clients. They first decided whether to accept the risk or not. If the risk is to be accepted, they decide how much coverage the client should receive and how much they should pay for it. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. The function of the underwriter is to acquire - or to 'write' - business that will bring money to the insurance company, and also to pretect the company's book of business, from risks that they reckon, will make a loss.
Accumlation : this relates to the potential situation where there are large number of individual risks grouped together in such a way that a single contingency could affect all at the same time.
Contractual Relationship : In coinsurance, both the Lead Company and the Follow Company (or companies) have separate contractual relationships with the insured. In reinsurance, the reinsurer acts as a new insurer, with the primary insurer effectively becoming the policyholder - the contractual relationship is between the insurer and reinsurer. The insured retains the original relationship with the insurer. The particular significance here is that IF the reinsurer is justified in declining the reinsurance responsibility in any claim, then the FULL amount falls on the insurer. The insured does not have any direct relationship with the reinsurer.
Lead Underwriter - Reinsurance : We have seen a definition of lead and follow companies relating to co-insurance. There are similar terms that apply in reinsurance. When a borker takes a risk to the market (details are on a note called a 'broker slip') he will approach an acknowledged expert in the particular field (a Lead Underwriter). The Lead Underwriter will examine the slip and detail the rate to be charged along with the percentage of the risk he will underwrite. The other underwriters (Follow Underwriters) will then place their respective percentages on the slip, subject to being satisfied with the rate. The broker will move around the market until he has 100% or more (over-subscribed) of the risk covered. Over-subscription is frequently done as there may be an underwriter who later

Licentiate Examination - IC 11 - Practice of General Insurance Exam - Important Points

Practice of General Insurance